RCS Shareholders Sought for Possible Lawsuits

At least two firms appear to be trolling for damaging information about RCS Capital, Nicholas Schorsch's embattled financial services company, which is also the country's second-largest independent broker-dealer by advisor count.

Law firm Kessler Topaz Meltzer & Check, a Radnor, Pa.-based class action litigator, is investigating what it describes on its website as "a potential shareholder derivative action on behalf of RCS Capital."

Daniel Check, a partner in the firm, says it is "way too early in the investigation" for the firm to comment or elaborate beyond what is on the web site.

SEEKING SHAREHOLDERS

Another investigation into "potential securities laws violations by RCS Capital and certain of its directors and officers" has been initiated by San Diego-based Shareholders Foundation, according to a statement issued by the company, which urges investors who purchased RCS shares to contact the group.

Shareholders Foundation describes itself on its website as "a professional loss-prevention, settlement recovery, portfolio monitoring service [that] specializes in securities class action and other legal actions that affect investor holdings and may lead to loss recovery."

RCS shareholders "have certain options" the release stated, and continued: "The investigation by a law firm focuses on possible claims on behalf of purchasers of the securities of RCS Capital Corp. concerning whether a series of statements by RCS Capital regarding its business, its prospects and its operations were materially false and misleading at the time they were made."

The group's general manager Michael Daniels did not reply to questions about the investigation and the company. An employee who answered the company's phone says Shareholders does not divulge the name of law firms and did not have a business relationship with law firms.

Check says Kessler Topaz is not working with Shareholders and is unfamiliar with the firm.

Shareholders provides "monitoring" services to shareholders for free, but is paid for its services by "larger investment groups," according to the employee.

RCS had no comment on the Shareholders Foundation investigation and did not respond to a request for comment on the law firm's investigation.

TROUBLES ACROSS SCHORSCH EMPIRE

Troubles within the Schorsch empire began at the end of last month, when American Realty Capital -- the flagship company of Schorsch's sprawling property and REIT business -- replaced its chief financial and chief accounting officer following revelations that accounting errors totaling around $23 million at the company went intentionally uncorrected.

A few days later, RCS abruptly terminated a deal to buy Cole Capital from American Realty Capital. (The latter firm said Wednesday it had sued RCS for withdrawing from the deal.)

Over the next several days, multiple big independent broker-dealers, including LPL and National Planning Holdings, said they were halting sales of American Realty Capital and RCS Capital investment products.

RCS subsequently issued an extraordinary statement emphasizing that it and American Realty Capital are "two separate and independent public corporations" and claiming that the two have no "overlapping members of management."

Speaking to Financial Planning at last week's Schwab Impact conference in Denver, RCS Chief Executive Michael Weil also emphasized the separation between the RCS and American Realty. LPL's decision to halt sales of the two companies' products was a not unreasonable pause given the circumstances, he added.

Schorsch, the top executive at both RCS and American Realty Capital, discussed the REIT market at a previously scheduled session at the Schwab conference. Addressing the controversy surrounding the two companies after his presentation, he claimed that the healing process has begun, he conceded that it will take some time to restore normalcy to American Realty Capital and RCS.